Ex-UBS trader Hayes charged in U.K. Libor manipulation probe

Tom Hayes, the former UBS AG and Citigroup Inc. derivatives trader, was charged as part of the U.K.’s investigation into manipulation of the London interbank offered rate.

Hayes, 33, was charged with eight counts of conspiracy to defraud at a central London police station today, the U.K. Serious Fraud Office said in a statement. He will appear at a London court on Thursday, said David Jones, an SFO spokesman.

Hayes, a British national who worked in Tokyo, was arrested in the U.K. probe on Dec. 11 and charged by the U.S. Justice Department the following day, along with one of his former co- workers from UBS. The U.S. charge was made public on Dec. 19, the same day UBS was fined $1.5 billion by U.S., British and Swiss regulators for trying to rig Libor and similar benchmarks.

Two employees of the brokerage RP Martin Holdings Ltd. were arrested by City of London police in the same probe. Hayes, of Surrey, England, has been charged in the U.S. with wire fraud and antitrust violations.

Hayes joined UBS in 2006 and worked at the Swiss lender until 2009, when he joined Citigroup. He was dismissed by Citigroup less than a year later for involvement in suspected rate-rigging, a person with knowledge of the matter said in October. He worked at Edinburgh-based RBS from 2001 to 2003.

Global regulators have fined UBS, Barclays Plc and Royal Bank of Scotland Group Plc about $2.5 billion in the past year for distorting Libor and similar benchmarks. At least a dozen firms remain under investigation around the world.

The Hong Kong Monetary Authority said today it has followed up with HSBC Holdings Plc and other banks to decide whether there has been inappropriate conduct in their benchmark rate submissions. Last week, Singapore’s monetary authority censured 20 banks for attempting to fix interest rate levels and ordered them to set aside as much as $9.6 billion.

According to the U.S. Justice Department, Hayes colluded with brokers, counterparts at other firms and his colleagues to manipulate the rate.

Yen Libor

Hayes “globally impacted transactions and financial products tied to yen Libor,” defrauding counterparties including New York-based financial institutions, the Justice Department said last year. The trader led a “massive effort” to manipulate yen Libor, at times daily, to profit from his bets on derivatives, according to the U.S. Commodity Futures Trading Commission, which was one of the regulators that has levied Libor fines.

He also allegedly worked with interdealer brokers to help persuade other rate-setting banks to make favorable submissions. Interdealer brokers line up buyers and sellers of securities and take a percentage from every trade. As interbank lending declined with the start of the financial crisis in late 2007, submitters increasingly relied on information from the brokers in determining what rates to submit, the Justice Department has said.

More than $300 trillion of loans, financial products and contracts are linked to Libor. Regulators are looking at how derivative traders and bankers who submitted interest-rate data colluded to ensure benchmarks benefited their own trades, and whether lenders low-balled submissions in 2008 to hide their true cost of borrowing.